Right-to-Buy Scheme

Part of the debate – in the House of Commons at 7:16 pm on 11th January 2006.

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Photo of Jim Fitzpatrick Jim Fitzpatrick Minister (Office of the Deputy Prime Minister) (London) 7:16 pm, 11th January 2006

I congratulate my hon. Friend Dr. Iddon on securing this debate on the right-to-buy scheme and I acknowledge his experience in these matters. I will try to respond to the points he has raised.

The Government want to offer as many people as possible the opportunity to own a home, provided that they can sustain the commitments that go with it. We have acted to help first-time buyers, including people living with family, key workers, and those renting privately or from social landlords. The right to buy is a key part of our strategy.

Our new HomeBuy scheme, due to commence in April 2006, will help some 100,000 households into home ownership by 2010, including 30,000 key workers. That will build on the success of our starter home initiative, which helped more than 10,000 key workers to find a home, and on our existing shared ownership and equity loan schemes. I should stress that, as my right hon. Friend the Deputy Prime Minister has said, we are committed to the principle of the right to buy. It has helped more than 1.7 million people to realise their aspirations to own their homes.

The right to buy has been a great benefit to individuals and their families, freeing them from a dependency mindset. It has brought wider social benefits too, by helping to create sustainable mixed-tenure communities, and it has generated more than £45 billion in capital receipts, which have been used to reduce local authorities' debt burden and free some resources to be ploughed back into social housing and other public spending.

But the right to buy has led to problems. The rules have been exploited by some tenants and by some companies. Other tenants have bought but have found the costs of home ownership burdensome. My hon. Friend refers to valuation of homes sold under the right to buy. Under section 127 of the Housing Act 1985, that is the price that the property would realise if sold on the open market by a willing vendor, disregarding any improvements made by the tenant. The market price depends on a number of factors, including the condition of the property, what the surrounding area is like and its location in relation to services. Improvements may add a lot of value in some areas, but much less in others.

The Government recognise that there are concerns about right-to-buy valuations, so we commissioned research from the College of Estate Management. This was published in 2004 and is available on the Office of the Deputy Prime Minister website. It recommended that guidance should be issued for those involved in right-to-buy valuations, so we convened a working group of practitioners led by the Royal Institution of Chartered Surveyors. The working group is preparing guidance, which will be published quite soon.

My hon. Friend referred to the cost floor, and suggested that it may not be working well. Under the cost floor, the right-to-buy discount should not reduce the price of a property below what the landlord spent on it during the previous 10 years. If my hon. Friend would like to send me more of the examples that he mentioned, our officials will look into the matter.

My hon. Friend also referred to the use of capital receipts. As he said, local authorities pay the Government 75 per cent. of their receipts from right-to-buy sales, which are taken into account when we determine the level of investment in housing that we will support, bearing in mind local needs. So pooling is a means of redistributing resources to areas where the need is greatest.

Like my hon. Friend, many Members will have seen the leaflets pushed through doors on council estates, claiming that the Government are about to do away with the scheme and urging tenants to buy now, with a little help from the company that has issued the leaflets. Research published in March 2003 highlighted the motives of some companies: to persuade people to agree to sell the homes they bought under right to buy to the company, at the discounted price available to tenants. So those companies are able to buy up ex-council homes cheaply and then let them out at market rents, which are unaffordable for people in the greatest housing need. I am glad to say that the Government have made such exploitation a whole lot harder. We have also tackled another abuse, which endangered regeneration schemes by forcing councils to pay compulsory purchase compensation to people who had bought their homes at discounted prices knowing full well that they were scheduled for demolition.

My hon. Friend mentioned antisocial behaviour by tenants. We agree that eviction often simply moves the problem round the corner, so our respect action plan, published yesterday, sees eviction as a last resort. It emphasises managing antisocial behaviour through rehabilitation, family support, antisocial behaviour injunctions and of course antisocial behaviour orders. Furthermore, we have given landlords the power to suspend right-to-buy applications from tenants involved in antisocial behaviour.

In the Housing Act 2004, we tightened up the right-to-buy rules to make the scheme fairer to both landlords and tenants who are committed to their communities. As my hon. Friend noted, we had previously lowered the maximum right-to-buy discount available to tenants in 41 areas under the greatest housing pressure, in terms of high levels of homelessness and high house prices.